Inventory/Stock Audit Services in West Bengal: Meaning, Limit, Procedure and Fees

The stock audit in West Bengal is essential for different types of organizations which has significant working capital invested in the inventory. It helps to reconcile physical stocks with the stock recorded in the books of accounts. Any discrepancy needs to be investigated, as it might be due to damage, theft, or operational reasons. Additionally, banks require inventory verification to ensure sufficient stock value covers the loans provided to businesses. Therefore, it is crucial to conduct inventory audits at specified intervals, whether you run a retail store, e-commerce, manufacturing unit, franchise, or dealership. BizFoc is a leading stock auditor firm with a PAN India presence and over 10 years of experience in the inventory verification across different sectors.

What is a Stock Audit?

A stock audit is also known as an inventory audit, which means physical verification of the quantity and value of stock with what is recorded in the books of accounts. The aim is to enhance the overall inventory management system by identifying potential risks, such as any misappropriation or damage and putting checks in place to ensure compliance with regulations. The inventory audit can include raw materials, work-in-progress, finished goods, and fixed assets. The inventory can be kept at different locations like retail stores, warehouses, Godown, manufacturing units, and franchise stores. The stock audit can be a blind count where stock is counted independently of what is recorded in the book of accounts. The stock audit involves suggesting best practices for improving stock management and recommending stock management software.

Stock Audit Applicability & Limit

Many MSMEs conduct stock audits due to management requirements rather than the regulatory requirements. The stock verification is carried out as prescribed under the Companies (Auditor's Report) Order, 2020, also known as CARO, 2020. The CARO, 2020 is applicable to below the organisations.

• Public Listed companies
• The stock audit applicability on private companies in case any of the following limits are satisfied:
  
  
  • Gross receipts or revenue is more than ₹ 10 crore in the financial year.
  • Paid-up share capital plus reserves is more than ₹ 1 crore
  • Holding or subsidiary of a Public listed company
  • Borrowings is more than ₹ 1 crore throughout the financial year

Stock and Fixed Asset Audit Reporting Requirement

The auditor needs to confirm on the following aspects related to the stock audit under CARO, 2020:

• Whether management has conducted the stock verification during the financial year
• Whether any discrepancies of 10% or more in the aggregate for each class of inventory were observed and any measures which were undertaken to deal with
• Whether management of the company has maintained and conducted physical verification of fixed assets like plant, property, equipment, etc. at reasonable intervals
• Whether any material discrepancies were noticed and how management has dealt with or reported the same.

Stock Audit Report Format

There is no standard format prescribed for the stock audit report. Every company can have their own format depending on the purpose of the audit. The auditor's report is usually accompanied by an Excel sheet for conducting any further analysis by the company. The report typically contains the following information:

• Location code and name
• Date of stock audit
• Details of SKU
• Count of physical stock for each SKU
• Count of stock as per books of accounts for each SKU
• Variance between physical stock and books of account for each SKU
• Any remarks for the variation
• Signature of manufacturing unit incharge
• Signature of Stock auditor

Stock Audit Procedure

There is a comprehensive guidance on the process of stock audit which help to conduct the audit properly:

Step 1: Planning of audit

It is necessary to know the auditing scope, types of inventories, locations, and specific items to be audited. Stock audit timeline must be set, taking into consideration the company’s function schedule.

Step 2: Conducting Physical Verification

To perform a physical count of the inventory stocks, one must use a systematic approach, like ABC analysis or cycle counting, to ensure comprehensive coverage, and discuss with the appropriate department for the counting process.

Step 3: Physical Inventory vs. Book Inventory

Compare the physical counts with the inventory, which is already recorded, write down the outcomes, investigate and reconcile irregularities, and document the reasons for variations post discussion with team on the ground.

Step 4: Report Preparation and Submission

Make a report of stock audit findings, which includes any irregularities, and suggestions for enhancement. To give a summary record to high-level management, highlight key outcomes, and recommend appropriate actions.

Stock Audit Checklist

Inventory audit checklist that is required to be followed for conducting an effective stock audit:

• Decide on scope of audit, time period and locations to be covered
• Gather required stock / SKUs details against which stock needs to be verified
• Recording the stock auditor team in and out time to the premises
• Recording the physical counts of stock / SKUs
• Ensure all stock / SKUs covered in the SKUs are covered
• Discuss and get the confirmation of the stock audit finding between unit in charge and stock auditor
• Present your findings along with any suggestions for improvement

Stock Audit Fee in West Bengal

The fee for stock audit services in West Bengal can vary depending on various factors such as the number of SKU, night audit, location, days required, and inventory complexity. The stock audit fee starts from ₹2,499 per man day, which exclude out of pocket cost and varies with the stock audit scope.

Benefits of Stock Audit

• Financial report development: Improving the existing inventory management, which leads to accurate financial reporting. Maintaining well stock ledger means presenting a correct financial condition in the business, and also helps to take better decision.
• Identifying and preventing fraudulent affairs: It helps to identify fraudulent affairs like misappropriation or theft of stock, and any discrepancies, which may affect business severely. It helps companies take necessary actions and prevent future occurrences or financial losses.
• Streamlining stock processes: The stock management must be efficient; thus, it leads to streamlining business operations. It shows the inefficiencies in the stock handling procedure and allows companies to optimize their process for better efficiency.
• Recognizing Overstock and Understock Situations: Overstocking ties up capital, while understocking can result in missed sales opportunities. Stock audits help in recognizing optimal stock levels, minimizing financial losses, and improving cash flow.

Bizfoc: Your Stock Audit Company in West Bengal

Bizfoc is a leading stock audit service provider firm in West Bengal with a PAN India presence. The Bizfoc team has more than 10 years of experience in inventory audits, assisting companies like Nykaa, Blinkit, and Asian Paints. Bizfoc provides best-in-class services at transparent pricing with a high degree of precision.

Conclusion

Stock audits are important for organizations where significant money is invested in the inventory. Organizations like manufacturing units, car dealers, franchisee retail stores, pharma companies, FMCG, and quick service restaurants deal with a lot of inventory, which makes auditing crucial. It ensures the correctness of the stock recorded in the book of accounts and highlights any discrepancies like theft, slow-moving items, and supply chain issues related to inventory. Thus, stock audits help to improve the profit and loss of the organizations.

FAQs related to Stock Audit